Get ready for the big gimmick' state budget

An approximately $29 billion state government operating budget under negotiation in the Legislature is likely to be based on a fast-growing amount of one-time cash items to avoid the prospect of a tax increase that would split the House’s and Senate’s Republican majorities.

The one-time items — derided by critics as gimmicks — include raiding off-budget programs, postponing bills and cleaning out reserves.

And this year, with a massive and unexpected collapse in tax collections, Republicans have shied away from putting off business tax cuts or increasing taxes on the booming natural gas industry or sales of tobacco products advocated by Democrats. Instead, they have looked to push one-timers past $2 billion.

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That is the highest they have ever been, not counting the $6.9 billion in federal recession bailout dollars that came to Pennsylvania from 2009 to 2011.

“This will be precedent-setting in one-time revenues,” said Randy Albright, the Democrats’ top staff aide on the Senate Appropriations Committee.

Some Republicans acknowledge that the trend toward a tax increase is inevitable.

Last November, the nonpartisan Independent Fiscal Office projected that Pennsylvania’s state government has a structural deficit that will hit nearly $2 billion in four years — and that was before this year’s tax collections fell behind by $600 million.

When Tom Corbett, a Republican who campaigned as a fiscal conservative, became governor in 2011, his office calculated that the $28 billion budget he inherited was built on $4.1 billion in one-time items, including $2.65 billion in federal recession bailout funds.

The one-timers that Pennsylvania will require this year will be far less than that, Corman said.

“For now, it’s OK,” he said. “But the more you do it, the more you set yourself up for problems down the road.”

That problem down the road is that those one-time items are not always available the next year and, right now, Pennsylvania’s state government obligations are rising by more than $1 billion a year. Primarily, that is a growth in Medicaid driven by the elderly entering nursing homes and the bill that is coming due for delaying past payments into public employee pension funds.

Nobody in state government has found an answer for those rising costs, despite considerable debate about it since Corbett took office.

“Sooner or later, a broad-based tax increase will be necessary to pay for it,” Corman said. “Whether that’s next year or the year after that, I don’t know. But they’re increasing at a billion dollars a year and revenues aren’t keeping up.”

It also sets up what some Democrats are warning will be an even more brutal budget next year. The budget for the fiscal year ending Monday is built on nearly $900 million in one-time items, according to estimates by the Senate Democratic Appropriations Committee. The majority of that was an infusion of cash reserves carried over from the 2010-11 fiscal year surplus.

One-time items well in excess of $2 billion will be required to prop up a budget of $29 billion without a tax increase for the 2014-15 fiscal year that begins Tuesday, according to Democrats.

Those one-time items will probably include transfers from small business loan funds, a state forests and parks improvement program, lottery profits meant to enhance programs for the elderly and cash meant to fight tobacco addiction and cancer.

Lackawanna County Sen. John Blake, the ranking Democrat on the Finance Committee and a former secretary of the Department of Community and Economic Development, said the transfers will endanger money that can benefit crucial economic development funds. Other one-timers are built on flimsy assumptions, he said, such as the expectation that speeding up a seizure of unclaimed assets from banks and other institutions will net $150 million.

“We’re out of space and time here,” Blake said. “We have an obligation to guarantee that public education is properly funded, that our safety net is properly funded, right? That our corrections continues to be properly funded, that our debt service continues to be property funded, and one-time transfers are not the solution set. It’s no way to govern.”